Shareholders without interferance
This query is : Resolved
19 December 2013
Hi
Can a private ltd company get deposit from other then Directors, If not then can they be made only shareholder and not directors and without voting rights or without any interference in working of company and its decision making process.
Plz help.
Can a private ltd company get deposit from other then Directors, If not then can they be made only shareholder and not directors and without voting rights or without any interference in working of company and its decision making process.
Plz help.
19 December 2013
Deposits in case of Private Limited Company
Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.
Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.
Rule 3 of Companies (Acceptance of Deposits) Rules, 1975 deal with the limit upto which a company can accept deposits/ loans. Private company exempted this limit.
For any invitation and acceptance of unsecured loan/deposits from relatives of directors and member, the company will have to file a statement in lieu of advertisement in accordance with the provisions of Rule 4A of the Companies (Acceptance of Deposits) Rules, 1975. The company will also have to file annual return of deposits in accordance with Rule 10.
Deposits in case of Private Limited Company
Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.
Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.
Rule 3 of Companies (Acceptance of Deposits) Rules, 1975 deal with the limit upto which a company can accept deposits/ loans. Private company exempted this limit.
For any invitation and acceptance of unsecured loan/deposits from relatives of directors and member, the company will have to file a statement in lieu of advertisement in accordance with the provisions of Rule 4A of the Companies (Acceptance of Deposits) Rules, 1975. The company will also have to file annual return of deposits in accordance with Rule 10.
19 December 2013
Thanks Ajay
Please guide me then how to get the deposit and making them member with out interference from them in working of the company affairs.
Please guide me then how to get the deposit and making them member with out interference from them in working of the company affairs.
19 December 2013
You are asking two questions:
Firstly acceptance of deposits, and
secondly making him as members without interference of such members.
So confirm on both questions at your end.
Firstly acceptance of deposits, and
secondly making him as members without interference of such members.
So confirm on both questions at your end.
19 December 2013
i want to know how to accept deposits form a person with out involving him in company affairs. As you have already told me i can not accept deposits from other then member/Shareholder or their relatives.
As the persons who are ready to investment in the company only against Shares.
As the persons who are ready to investment in the company only against Shares.
25 July 2025
Your query is regarding how to raise funds in a private limited company from a person without giving them management control or voting influence, especially when deposits from non-members are restricted.
Let’s break it down and give you the clear, legally valid solution under the Companies Act, 2013 and relevant rules:
🔹 Your Goal:
Accept money from a person who is not a director, and
Avoid giving that person influence over management or decisions.
✅ Legally Permissible Ways:
1. Accept Money as Share Application Money
Accept money against issue of shares, i.e., share capital.
Under Companies Act, 2013, a private company can issue shares to any person (member or not) via private placement (Section 42) or rights/bonus issue (Section 62).
This way, they become shareholders, but:
You can issue shares with differential voting rights or non-voting shares (see below).
2. Issue Shares Without Voting Rights
As per Section 43 of the Companies Act, 2013, you can issue:
Equity shares with differential rights (like limited or no voting power),
Or preference shares (which usually have no voting rights except in specific cases).
🛠️ Conditions:
Your Articles of Association (AoA) must allow such issue.
You must comply with Rule 4 of Companies (Share Capital and Debentures) Rules, 2014 for issuing shares with differential rights.
This way:
The investor becomes a shareholder, but has no real control or interference in day-to-day affairs.
3. Accept Money as Deposit – Only from Members
Under the Companies (Acceptance of Deposits) Rules, 2014:
A private company can accept deposits from members, subject to conditions like:
Filing Form DPT-3,
Maintaining a register,
Issuing deposit receipt, etc.
You cannot take unsecured deposits from non-members, except directors or relatives under certain exemptions.
➡️ Therefore, if the investor becomes a member, you can accept deposits from them up to 100% of paid-up capital + free reserves (if the company is eligible).
❌ You Cannot Do the Following:
Take loans or deposits from the public or outsiders who are not members (except directors or relatives, under exemptions).
Take unsecured loans disguised as investments without issuing shares.
Let’s break it down and give you the clear, legally valid solution under the Companies Act, 2013 and relevant rules:
🔹 Your Goal:
Accept money from a person who is not a director, and
Avoid giving that person influence over management or decisions.
✅ Legally Permissible Ways:
1. Accept Money as Share Application Money
Accept money against issue of shares, i.e., share capital.
Under Companies Act, 2013, a private company can issue shares to any person (member or not) via private placement (Section 42) or rights/bonus issue (Section 62).
This way, they become shareholders, but:
You can issue shares with differential voting rights or non-voting shares (see below).
2. Issue Shares Without Voting Rights
As per Section 43 of the Companies Act, 2013, you can issue:
Equity shares with differential rights (like limited or no voting power),
Or preference shares (which usually have no voting rights except in specific cases).
🛠️ Conditions:
Your Articles of Association (AoA) must allow such issue.
You must comply with Rule 4 of Companies (Share Capital and Debentures) Rules, 2014 for issuing shares with differential rights.
This way:
The investor becomes a shareholder, but has no real control or interference in day-to-day affairs.
3. Accept Money as Deposit – Only from Members
Under the Companies (Acceptance of Deposits) Rules, 2014:
A private company can accept deposits from members, subject to conditions like:
Filing Form DPT-3,
Maintaining a register,
Issuing deposit receipt, etc.
You cannot take unsecured deposits from non-members, except directors or relatives under certain exemptions.
➡️ Therefore, if the investor becomes a member, you can accept deposits from them up to 100% of paid-up capital + free reserves (if the company is eligible).
❌ You Cannot Do the Following:
Take loans or deposits from the public or outsiders who are not members (except directors or relatives, under exemptions).
Take unsecured loans disguised as investments without issuing shares.
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